The process of working with creditors and collections agents to lower credit card balances, payments, or interest rates is called debt negotiation. Aggressive collections efforts have given the process a tough reputation, but sometimes a simple phone call is all it takes to make a change.
Know Debt, Know Rights
Negotiating can be done without assistance, if all account information is prepared before making a phone call. Establish the amount being paid, whether monthly or a settlement offer. Know the exact date it is going to be paid, and do not waver from these terms. Also, research your rights on the Federal Trade Commission website, or request a brochure on consumer rights. Debt collectors must operate according to these regulations.
Pay on Personal Schedule
Debtors must create a payment schedule they are comfortable with. It should not disrupt the payment of daily living expenses and monthly bills. Decide which card to pay first, usually the smallest and pay the minimum amount on other cards.
The exception to this is a card which has given written or verbal notice of intent to seek a default judgment against the debtor. In many states, if a debt is ignored despite repeated efforts to reach the person for settlement, the creditor can and will go to court and request the full, not discounted amount be paid. Failure to show up at the hearing or acknowledge collections efforts before it comes to this will result in garnishment of wages or tax returns, without further notice.
If in-house collections have begun, inform the company of your intent to get the account in good standing. Place a phone call and find out how much it will take to get back to a regular payment schedule; if late fees need to be paid first, tell them you would like it spread over several months. Credit card companies are not aggressive as a rule. They want to avoid losing money and will usually work with debtors.
The Settlement Myth
A person who owes a debt which has gone to third party collections does not need a professional to negotiate for them. At this stage, the company handling the debt is in business to collect as much as they can and clear the account from the books. They are authorized to settle for between forty and sixty percent of the total amount. If they have the person on the phone, the agent will indicate the total amount owed, and usually make an offer to settle the debt then and there.
If they do not offer this, the individual can take the figure for the entire amount and make their own offer. Most agents will go as low as 40 cents on the dollar, so go straight to this number and do not change it. Also, do not be fooled into believing it is a one time offer. If the sum cannot be paid on the spot, the debtor should give them a date on which they will pay.
Negotiate with confidence and start the process without paying for assistance. By taking the initiative, most companies are ready and willing to work the situation out to everyone’s benefit.
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